How has the global political economy changed as a result of the global financial and economic crisis since 2007 - Assignment Example

Today, most economists aver that the worst is behind us. However the pangs of the latest recession are still being felt. The immediate future is not rosy with growth forecasts being downgraded by most countries. That the distant future would bring back the joys of boom period is what every nation is pinning its hopes on. Along with this economic and financial crisis that has seen unemployment numbers soar, banks collapse, incomes shrink and demand wane, there has been turbulence in the world political scene as well.

If the stock markets are shaky, so are the government set ups of many nations. Vukovic (2011) maintains that the reason for the crisis lies primarily in the political domain. He asserts that the strong influence of interest groups, lobbying power of financial corporations, leads to favoritism in macroeconomic policies and inefficient resource allocation. While the mighty, deemed to be infallible United States is facing a leadership crisis, there is political turmoil in European countries. Walker (2011) suggests that this crisis of leadership is prevailing, along with United States, in Europe, Japan and Australia.

Furthermore this leadership deficit extends to institutions like the IMF. The BRIC countries (Brazil, Russia, India and China) are also facing political crisis of sorts as this crisis has spared few. The present paper looks at the political scenario in certain select countries of the world to understand how the global financial and economic crisis since 2007 has impacted the global political scene. United States of America Duchin (2009) establishes that the banks' political ties played a considerable role in Troubled Asset Relief Program (TARP) fund distribution.

It was thus the political activism and not prudence that governed government spending when recession was at its peak and the beleaguered companies clamored for cash. There has been a political stand-off in the U.S between the Republicans and the democrats as the two parties failed to agree on key issues. So much so that the disagreement between them brought the US on the brink of a debt default and kept the world on tenterhooks fearing another meltdown. The latest arrangement between the two warring factions will enable the U.

S government to borrow money till the end of 2012. The government, on its part will ensure a spending cut of almost $1 trillion spread over the next decade. Experts opine that the compromise formula may be short-lived and questions like “where to cut government spending?” could again flare up the political scene. Furthermore, is the political constrains that will decide whether Obama can go in for the third round of quantitative easing or not. India Today (2011) avers that Barack Obama, the U.

S president, has numerous issues to confront, including the first ever credit rating downgrade of the US, as he goes for reelection. The president would be hoping that his $447 billion jobs bill translates into favorable, tangible numbers by then. The status of the U.S. dollar as the reserve currency of the world automatically links the currency exchange rates with political overtones. The movement of this currency leads to political repercussions in the rest of the world. Germany Greece has been the latest beneficiary of rescue loans granted after the consent of Euro zone leaders.

Germany’s Chancellor Angela Merkel., has come under fire from the Christian Democratic Union for her efforts to secure additional bailout funds for Greece. Opinion polls in the